4/26/2010 @ 12:00AM

Kickfire's Cheap Data Mining

Business is drowning in data, and Bruce Armstrong could not be happier. “This is how multibillion-dollar companies get made,” he says.

Armstrong is chief executive of Kickfire, a computer company in Santa Clara, Calif. that promises to turn pain into profit by analyzing the billions of clicks barreling through every connected company. It does so with cheap chips and free software, at a fraction of the cost that until recently companies paid for similar technology.

Thanks largely to the Internet, the world is creating something like a zettabyte of information every year. To get a sense of that number, start with a terabyte, which is the storage capacity of an amply endowed home PC or media center, and scale up from there by a factor of a billion.

Much of that data is ephemeral stuff like encryption algorithms and cat videos, but still there’s the big business of analyzing online shopping behavior, video consumption, the placement of Web ads and the use of smartphones. That business takes in $1 billion a year and is growing at 40% annually.

Companies like
Wal-Mart
look at how well products sell, then set prices and shift store supplies with computers from companies like Teradata that cost $1 million or more. The Kickfire box does much of the same analysis but costs from $35,000 to $75,000.

One Kickfire customer is Liverail, a San Francisco company that places 1 billion video ads a month online for outfits like
Sony
and EMI Music, providing reports on what is popular, whether people are watching or skipping the material, even how often the sound is muted. Six months ago Liverail paid $100,000 for three low-end Kickfire boxes (enough to handle 3 terabytes of data) and went from looking at daily customer reports to real-time adjustments to what the crowd is doing. “Sony sees the spikes as they happen,” says Liverail Chief Executive Mark Trefgarne. “Everyone reacts to trends immediately.”

Kickfire’s generic semiconductors are tweaked with patented software that enables supercomputer-type parallel processing in a single chip. Compare: Companies like
Nvidia
have used the off-the-shelf chip process to make videogame chips faster and cheaper, eventually muscling into
Intel
‘s turf.
Hewlett-Packard
hopes to do the same to
Cisco
‘s computer networking once it completes its purchase of
3Com
. With Kickfire, another high-margin industry is in the crosshairs.

Kickfire is attractive to both smaller companies and departments in larger outfits–among them, phonemaker
Nokia
and Mindspark, a division of Interactive Corp. that specializes in social and entertainment Web sites. “The stick is pressing the high-end companies,” says Armstrong. “The carrot is creating new customers who could never before afford this.”

Armstrong, 48, has lived in both worlds. He was an early employee at Teradata in 1981 and sold custom computers to Wal-Mart and others. In the mid-1990s Armstrong started a data analysis software company that was bought by
Sybase
. Kickfire’s technology was created by two former employees of
Sun Microsystems
. Armstrong came on to bring the first product to market in May 2009. In the first year he sold $5 million worth of boxes to ten customers. His goal: double revenues every year. The company has raised $30 million in venture capital. Armstrong will soon hit the road for another $20 million, mostly for marketing.

The competition is not asleep. Teradata now has a $56,000 appliance that handles a terabyte of data. Netezza, another vendor of data mining hardware, is looking to move into cheaper parts of the market. Oracle this year purchased Sun, which gives it both hardware and control of the open-source database software MySQL. Armstrong figures Oracle will keep MySQL healthy and free, since MySQL helps it take business from
Microsoft
.

Plenty of room for all of them, Armstrong figures. After all, he says, “We’re where the data is being driven.”